Rubber Falls as Oil Drops, Thai Supply Shortfall May Be Limited

By Aya Takada and Supunnabul Suwannakij

March 2 (Bloomberg) -- Rubber decreased for the first time in three days as a drop in crude oil reduced the cost of making rival synthetic products used in tires, and on speculation that a seasonal decline in Thai supply may be limited.

Futures in Tokyo lost as much as 3.2 percent, erasing gains posted in the previous two days. The price reached this year’s peak of 306 yen per kilogram ($3,426 a metric ton) on Jan. 15, which was the highest level since September 2008.

Crude retreated after reaching the highest level since Jan. 13 yesterday on forecast that a report this week will show U.S. crude supplies increased for a fifth week. Natural rubber supply in Thailand, the largest producer and exporter, had a “robust” 23.8 percent annualized growth in January on favorable weather, according to Association of Natural Rubber Producing Countries.

“Supply from Thailand during the wintering season this year may not decline as much as last year, as exporters have enough products to offer after active production,” said Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo. During wintering, or the low production season between February and April, rubber trees shed their leaves and latex production slows.

Rubber for August delivery, the most-active contract, lost as much as 9.6 yen to 288 yen before settling at 290.4 yen on the Tokyo Commodity Exchange.

Crude oil for April delivery traded at $78.59 a barrel in electronic trading on the New York Mercantile Exchange at 3:18 a.m. Singapore time. The price rose to $80.62 yesterday.

Low-Production Period

Natural rubber output from key suppliers during the low- production period will improve this year, boosting exports, ANRPC said in its February report. The group represents countries accounting for 94 percent of global production.

Production in Vietnam, the third-largest shipper, during the wintering season will probably grow 14 percent from a year earlier to 20,600 tons, helping raise total output this year by 6.4 percent to 770,000 tons, the monthly report said. Exports will rise 6.6 percent from last year, it forecast.

In the cash market, Thai rubber prices tracked falls on the futures markets but prices may regain ground as output in many areas have declined as wintering starts, the Rubber Research Institute of Thailand said on its website today.

The auctioned price of unsmoked sheets was little changed at 100.83 baht ($3) per kilogram. Ribbed smoked sheets fell 1 percent to 104.19 baht a kilogram, according to the institute.

May-delivery rubber on the Shanghai Futures Exchange fell as much as 3.2 percent to 24,060 yuan ($3,524) a ton, before settling at 24,475 yuan. It retreated after reaching 25,580 yuan yesterday, the highest level since Jan. 21.

(businessweek.com)